Publication strategy for the 1998 revised
Consumer Price Index

In a new plan for the Consumer Price Index, the index will
have a new set of items, to be published at the national and
local levels

Beginning in 1998, the Bureau of Labor Statistics will
introduce a new geographic area sample, a revised item structure,
and updated expenditure weights into the Consumer Price Index
(CPI). Approximately every 10 years, the CPI is revised in this
manner in order to keep the index up to date. Since World War II,
the CPI has been revised in 1953, 1964, 1978, and 1987.
A new geographic
sample is selected in order to account for shifts in population
and to ensure that the sample is representative of current
demographics. The CPI item structure, the term for the
categories of products and services that are priced and for the
scheme used to aggregate them into broader groups, is revised to
account for changes in consumer buying habits and to accommodate
new or changing products in the marketplace. The expenditure
weights are replaced with information from a more current
consumer survey to properly reflect changes in the purchasing
patterns of the populations represented.Taken together, these
changes require the development of a new publication strategy for
the CPI. This strategy encompasses not only the presentation of
the changes, but also the methods used in determining the exact
number and form of the indexes being published and methods for
easing the transition from the old publication structure to the
new one.The 1998 CPI revision
contains substantial changes in both the items being presented
and the frequency of publication of local area indexes. In
addition, the CPI is, for the first time, using measures of
variability to help determine what should and should not be
published. Also for the first time, the Bureau is preparing and
publishing some new indexes a year ahead of their actual
introduction in 1998, in order to help ease the transition for
users in cases where there has been a substantial change in the
composition of some local area indexes.

U.S. item structure

Effective in 1998, there will be considerable changes to both
the items being priced and the manner in which they are being
aggregated in the CPI. The most notable change in presentation is
a reconstruction of several major groups, together with a
resulting change from the currently available seven major groups
to a new total of eight. (A detailed description of the revised
item structure is provided in "Changing
the item structure of the Consumer Price Index".)Currently the major
groups are food and beverages, housing, apparel and upkeep,
transportation, medical care, entertainment, and other goods and
services. Three of these groupsfood and beverages,
transportation, and medical carewill remain the same. The
apparel group was modified to exclude apparel upkeep products and
services. The entertainment group has been slightly redefined and
renamed "recreation," and a new major group, education
and communication, has been formed from former subelements of the
housing, entertainment, and other-goods-and-services groups. The
addition of the latter group reflects the increasing importance
of information and information-processing equipment, as well as a
host of other consumer communication products and services that
have grown so remarkably in the last 10 years. The linking of
education with communication into a new major group makes a
coherent arrangement, as communication and information-processing
products and services become inextricably intertwined with the
educational process, ultimately reflecting the growing importance
of the role of education in our society.Other important
changes in the CPI item structure at lower levels are an
expansion of the food-away-from-home index, which reflects the
growing habit of eating out in the United States; a reorientation
of the car and truck indexes to a vehicle index, which reflects
the increase in the use of trucks for personal transport, as well
as the growing difficulty in defining the difference between the
two means of transportation; and an expansion of the
information-processing equipment index.Appendix 3, gives a complete
listing of the new CPI publication structure. This national-level
index structure is composed of the complete CPI item structure
and several additional substratum-level indexes that are included
in order to maintain continuity for certain important users.
These substratum indexes appear in italics in the appendices. The
set of published index series for regional and national city-size
class data is presented in Appendix 3a,
the set of published index series for city and regional city-size
class data is presented in Appendix 3b.

Publication plan for geographic areas

In each revision, the CPI geographic sample is selected to be
representative of the current demographics of the United States.
The current revision utilizes the 1990 Census of Population. CPI
statisticians and economists develop an updated area sample
design, decide on new local area indexes, and change the
frequency of publication for local area indexes in order to
better reflect the new demographics.These changes allow
the Bureau to optimize the allocation of samples based upon a new
area design and to incorporate the revised definitions for
metropolitan statistical areas.1The selection of a
new sample of urban areas is one of the first steps in the
periodic revision of the CPI. The new area sample selected by the
Bureau is based on revised definitions for the Nations
metropolitan areas that the Office of Management and Budget (OMB)
announced on December 31, 1992. All agencies that conduct
statistical activities to collect and publish data for
metropolitan areas have been directed to use the most recent
definitions established by OMB. (A discussion of the geographic
sample used for the CPI revision is found in "The redesign of the CPI geographic
sample".)In addition to the
national index, the Bureau currently publishes indexes for 29
cities (metropolitan areas). In 1998, it will continue to publish
indexes for all but two of these cities: Buffalo-Niagara Falls,
New York; and New Orleans, Louisiana. Also, because of the
revised OMB definitions pertaining to metropolitan areas, two
other citiesWashington, DC, and Baltimore,
Marylandfor which the Bureau currently publishes separate
indexes will constitute a new consolidated metropolitan
statistical area for which a single index will be published. The new publication
plan for local area indexes, to begin with the index for January
1998, is as follows:

 Monthly indexes will be published for the
three largest cities. Because of sample design
considerations, indexes for the Philadelphia and San
Francisco areas, both currently published monthly, will be
published every other month following the release of the
December 1997 index.

 Bimonthly indexes will be published for the
next 11 largest cities, including Atlanta and Seattle, which
currently have semiannual average indexes.

 Semiannual average indexes will be published
for 12 additional cities, including Pittsburgh and St. Louis,
which currently have bimonthly indexes.

 The Bureau will continue to publish separate
indexes for the four major regions of the United States
defined by the Census Bureau. However, beginning in 1998,
there will be only two size classes for metropolitan areas,
instead of the current three: size A, consisting of areas
with a population greater than 1.5 million; and size B/C,
comprising areas with less than 1.5 million. This cutoff
point of 1.5 million reflects a rise from the current cutoff
of 1.2 million and is important because cities in size class
A are those for which the Bureau publishes city-level
indexes. The B/C size class is a combination of the old size
B and size C metropolitan areas. In addition to the two
metropolitan area size indexes for each region, separate size
D indexes for urban nonmetropolitan areas will continue to be
published for both the Midwest and the South. Separate
indexes for Northeast and West urban nonmetropolitan areas
were discontinued in 1987.

Exhibit 1 lists all the areas for which
indexes will be published, beginning in January 1998.

Variance-based publication policy

The Bureau always has endeavored to present high-quality data.
In 1991, the CPI program developed a Variance Calculation System
to measure the variability of most of its major indexes by
calculating a coefficient of variation2
for each index. The 1998 revision allowed the program for the
first time to take advantage of this system in determining its
publication plans. The use of the information resulted in plans
to provide slightly less detail at publication levels below the
U.S. city average, dropping those lower level indexes whose
variability calls their quality into question. (See Appendices 3a and 3b
for the publication stubs for these levels.)Rules for acceptable
variability at differing levels of publication were developed and
used as an input to the overall publication decision process3. Other elements incorporated into this
decision process included the need for consistency of published
detail across geographic areas, the value of the data series to
our users and continuity with our current publication practices.At the present time,
variance data for the all-items index and major product groups
for the United States and its four major Census Bureau regions
are published annually.4
Starting in 1999, the CPI program plans to expand the publication
of variance data to eventually include variances for all
published indexes. The purpose of this policy is to keep users
informed of the reliability of published estimates and to
encourage users to consider the reliability of an index series
when selecting it for use. Additionally, the CPI program will
begin a policy of reevaluating publication decisions every 5
years, based on an analysis of the variability of its indexes.
This will be the first time the program will systematically
evaluate publication decisions between major revisions.

Transition issues

Because the changes the CPI undergoes during each revision can
have a major impact on users, special steps are taken in order to
ameliorate the effects of those changes. Four steps are being
taken to assist in the transition to the 1998 CPI revision: early
footnoting of series that are changing or being dropped, the
publication of overlap indexes, the publication of underlap
indexes, and the publication of special historical series.
Beginning with the
release of the January 1997 index, data series that are changing
or being dropped from publication will be footnoted as such in
all published BLS tables. This provides an early warning to users
to reconsider their use of those indexes and gives them time to
make any necessary changes. Overlap indexes are
indexes that continue to be published using old item structures
and old weights for a period after the introduction of a new item
structure and weighting scheme. Such indexes have been a BLS
policy for major revisions since 1964. The standard time frame
for overlap indexes has been to provide them for the first 6
months after the introduction of the new structure, and the
standard scope has been to produce these indexes for the old
U.S.-level item structure and just the all-items index for local
areas. The 1998 revision will follow this approach.Also for the 1998
revision, a new transitional step has been taken: the publication
of underlap indexes. These are indexes that are produced for new
publication areas using old weights and structures, with a
specially developed aggregation tree for a period before the
introduction of these areas. Underlap indexes will be developed
to handle two specific situations arising in the 1998 revision:
the combination of Washington and Baltimore into a single
metropolitan area and the combination of two separate population
size classes for metropolitan areas into one size class. These
two situations present significant changes to the publication of
CPI data, and because of substantial technical difficulties in
developing overlap indexes for either of them, the CPI program
devised the new approach of underlap indexes to assist users
during the transition.The following list
provides a summary of how each geographic-level index will be
handled during the transition:

1. All regions and the national and regional A-sized and
D-sized city classes will have an overlap all-items index
produced from the old weights on a monthly basis from January
1998 to June 1998.
2. The new national and regional B/C-sized city index
(composed of current B- and C-sized cities) will have
underlap all-items indexes produced monthly starting in
January 1997, with a base of December 1996 = 100.0, using old
weights and a special aggregation structure. In January 1998,
this index will be linked to the new structure. All-items
indexes will not be published for the old B- and C-sized city
classes after December 1997.
3. The three cities of New York, Los Angeles, and Chicago,
for which a local index will be published monthly, will have
an overlap all-items index produced from the old weights on a
monthly basis from January 1998 to June 1998.
4. The two cities (Philadelphia and San Francisco) for which
indexes are now published monthly, but that will drop to
bimonthly publication under the new plan, will have an
overlap all-items index produced from the old weights on a
bimonthly basis; overlap indexes for February, April, and
June 1998 will be published.
5. The Washington-Baltimore consolidated metropolitan
statistical area will have an underlap all-items index, as
well as selected components, produced bimonthly starting in
January 1997, with a base of November 1996 = 100.0, using old
weights and a special aggregation structure. In January 1998,
this index will be linked to the new structure. All-items
indexes will not be published for Washington and Baltimore
separately after November 1997.
6. All cities continuing their current publication
frequency and cycle will have an all-items index produced
from the old weights on the appropriate frequency from
January 1998 to June 1998.
7. For the two cities (Pittsburgh and St. Louis) changing
their frequency from bimonthly to semiannual publication, an
overlap semiannual all-items index will be produced in July
1998, along with all other semiannual averages.
8. For the two cities (Atlanta and Seattle) changing their
frequency from semiannual to bimonthly publication, an
overlap semiannual all-items index will be produced in July
1998, along with all other semiannual averages.
9. The two cities (Dallas and Miami) currently on a bimonthly
publication schedule, but changing their cycle, will have a
bimonthly overlap all-items index produced along with the new
indexes on the new cycle from January 1998 to June 1998.
10. The entire current U.S.-level aggregates and all-item
strata will have monthly overlap indexes produced along with
the new item structure from January 1998 to June 1998.

The last
transitional device created to aid CPI users during the 1998
revision is the special historical series for certain indexes
that are new or that have changed in concept or composition. The
historical series for the indexes that are new will provide the
user with an additional 5 years of data for these series, going
back to January 1993. The historical series for the continuous
indexes that have changed in concept or composition will provide
the user with 5 years of a "research" index series.
This will allow the user to compare how these indexes actually
performed with how they would have performed if the change in
their composition had been made 5 years ago.For the 1998
revision, 12 U.S. city average indexes were identified as
requiring a special historical series; these are coded with the
designation "History" in Appendix 3. At the major
group level, these series are housing, recreation, education and
communication (all new series), and other goods and services.
Below the major group level, the series are fruits and
vegetables, fuels and utilities, household furnishing and
operation, new and used motor vehicles (a new series), audio and
video (a new series), education (a new series), communication (a
new series), and information and information processing.

Rebasing

It has been the
Governments longstanding policy that index bases should be
updated, or "rebased," periodically. The CPI program
implements this policy by rebasing the index as part of its CPI
revision. Rebasing is the act of establishing a new base for the
index (that is, designating when the index equals 100) and
recalculating the index numbers to reflect the new base. The
current official index base for the CPI is 198284 = 100,
which corresponds to the current expenditure weight reference
period. This period will be updated to 199395 with the
publication of the January 1998 CPI, and the official base for
the CPI will be revised 1 year later, to bring the base in line
with the expenditure weight reference period.

Exhibit
1. Metropolitan Areas for which
revised CPI indexes will be published beginning January
1998

2 The
coefficient of variation of index change used to determine index
publishability was calculated as the root mean variance of index
change divided by the mean index change. Mean index change and
mean index change variances were computed from estimates for each
month over a five year period.

3 These
variance-based rules were developed by a team of CPI
statisticians and economists, headed by Sylvia Leaver and
additionally composed of Richard Bahr and Maureen Greene.
Additional work in applying these rules was performed by Ms.
Leaver and Richard Kerr.

4 See
"Variance Estimates for Changes in the CPI," in CPI
Detailed Report Data for April 1996.

Steven Grandits is a supervisory economist in the Division of
Consumer Prices and Price Indexes, Bureau of Labor Statistics.